The Hindu Business Line : Positive tones in the telecom sector

WITH the Assembly election results in four of the three States turning favourable to the ruling dispensation, the National Democratic Alliance (NDA), led by the Bharatiya Janata Party (BJP), naturally exudes a sense of accomplishment. No wonder the Finance Minister, Mr Jaswant Singh, can now talk of ushering in a second Green Revolution and going ahead with the unfinished agenda of economic reforms to cash in on the feel-good factor pervading the economy, thanks to a combination of conducive factors. Among all the economic reform measures announced by successive governments from time to time since July 1991, only in one sector was the progress not only tangible but also substantial: Telecommunications.

Though the Indian economy had undertaken comprehensive reforms in financial services, power sector, petroleum and natural gas industry, roads and ports and, to a limited extent, airports, it is only in telecom that the results are best visible. Despite the constant spats between basic operators and cellular players, as also between wireline and wireless operators, the industry, particularly the cellular telephony, has grown at a mind-boggling pace. So much so that even for the common man, cell-phone is no longer a luxury.

The Government opened up the telecom sector in phases since the early 1990s. The National Telecom Policy-1994 and the New Telecom Policy-1999 (NTP-99) ushered in rapid growth with the fast development of telecom infrastructure. The measures include extensive use of wireless in local loop (WLL) technology for faster and more economical roll-out of telecom services, deployment of the optical fibre technology in local and long distance networks to provide larger bandwidth and reliable telecom service, faster expansion of Internet services, and opening up of Internet telephony for international long distance, and establishment of Universal Service Obligation Fund (USO) to reinforce and accelerate the spread of rural telephony.

With these measures, the teledensity moved up from 2.33 per hundred population in April 1, 1999 to 6.07 as on September 30, 2003. The total number of telephone lines from 228 lakh to 649 lakh, optical fibre cable length from 0.65 lakh km to 4.12 lakh km and community access through public call offices (PCOs) from 5.20 lakh to 15.33 lakh in the period. Cellular service operators today serve over 19.3 million subscribers across the country. The last two years have seen the cellular services grow at 80-100 per cent per annum. The call charges for cellular phones have come down from the highs of Rs 16.80 per minute to Rs 1.80. One of the important reasons for the telecom industry's growth has been the regulatory agency, the Telecom Regulatory Authority of India, notwithstanding the criticism made about its functioning. TRAI determines the wholesale price for the range of services the industry offers customers. In the deregulated market, the interconnection between the new entrants and the incumbent operators holds the key, and the most important thing is to determine the connection of access.

TRAI fixes the interconnection charges, ensures the orderly growth of the industry and is responsible to ensure that the operators do not band together and rig the markets that offer a menu of multiple services for the customers. After the NTP-99 and migration from licensing to revenue-sharing regime, TRAI came into its own as it had to contend with an oligopolistic competitive market with numerous firms providing heterogeneous services, the disarray in the market due to tariff wars, the blocking of competitors' calls by operators, the permission granted to mobility based on WLL systems to the basic service operators, and the squabbles over the interconnect regime.

As there prevailed wide variations in service areas of telecom services, TRAI recommended the implementation of Unified Licensing regime in two stages with the Unified Access Licence Regime for basic and cellular service in the first phase, to be followed by a process of defining the guidelines and rules for fully Unified Licence/Authorisation regime.

The Government approved the TRAI recommendation, and the Unified Access (Basic and Cellular) service regime has been implemented. Following the detailed guidelines issued on Novemebr 11, 27 basic service licences migrated to Unified Access (basic and cellular) services and a dozen letters of intent for grant of Unified Access (basic and cellular) services licences have been issued against fresh applications. This was followed up by TRAI circulating a consultation paper on November 15 for formulating recommendations on terms and conditions for "Unified Licence for Telecommunication Services".

The idea behind the unified licence is that technology is moving rapidly, particularly usage of IP-based technology and offering inexpensive solutions for telecom services. As the latest TRAI consultation paper pertinently put it, "the evolving telecommunication technologies, increasing bandwidth capabilities and embedded intelligence in elements of all types of carriage media, possibilities of innovative services through software control both by the operator and the user and increasing use of IP technology are increasingly blurring the boundaries between different services and eliminating the importance of distance".

As persisting with the existing service specific licensing regime would no longer hold good in the emerging technological evolution, "the licensing regime has to be such that it not only permits such technological developments to be smoothly and cost effectively made available to consumers but in fact encourages further evolution". Hence, the extant service specific licensing system is to be abandoned at the earliest, it said adding that "since the Unified Licensing System is not service specific, therefore, the annual licence fee (as a percentage of revenue share), FDI limits will have to be the same irrespective of the type of service(s) offered by various service providers." The advantages of the unified licensing regime include scale economy, scope economy (range of services) and quality of service. It also makes effective use of the scarce spectrum.

Apart from ushering in a unified licensing regime in the first phase, TRAI has been able to effect a level-playing field between the users of GSM versus CDMA (Code Division Multiple Access) technology. As many an expert has vouchsafed the efficiency of the CDMA technology (it is at least five-six times more spectrum-efficient than GSM), its success in the country owed largely on operators' ability to capture the low end of the market through affordable handsets. Here companies such as Reliance Infocomm and Tata Teleservices have been successful in introducing and popularising handsets.

Following the Government's acceptance of TRAI recommendations on UASL, the basic operators have migrated to UASL after paying the requisite fee including a penalty. With market distortions removed and a congenial field created for operators, there is dynamism and vibrancy in the industry, enabling convergence of tariffs for the common benefit of all users. This is borne out by a TRAI study on the comparative effective charge per minute for 400 minutes of usage per month in local calls. The study showed that the effective charge for a minute in respect of operators with the lowest tariff for fixed line operator was Re 0.78; for WLL (M) Rs 0.678, and for cellular Rs 1.12. This also needs to be viewed against the fact that cellular operators are offering a host of long distance tariff packages and the lowest rate per minute for a domestic long distance call from a mobile phone is less than the rate applicable for calls from fixed phones.

Convergence of tariff apart, the convergence of technology would enable licencing to cover not only telephone and a range of value-added service but also for broadcasting, where the advent of conditional access system (CAS) remains mired in controversy with the last-mile (cable) operators, content providers and multi-system operators stuck in their stance on what constitutes the cost for each.

As in the US, where the Federal Communication Commission is in control of both broadcasting and telecom services, it is time that TRAI was roped in to resolve the sticky issues of broadcasting regulations so that the consumer would benefit of a regulatory agency whose second phase implementation of UASL (Unified Access Service Licence) should herald a communication revolution in India.

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